Spanish Underlying Inflation Rate Declines as Recession Deepens

Spain’s core inflation rate dropped in November from a four-high year as the euro region’s fourth- largest economy was on track to shrink for a sixth straight quarter, easing pressure on prices.

Annual core inflation, which excludes energy and fresh food prices, fell to 2.3 percent from 2.5 percent a month earlier, the National Statistics Institute in Madrid said today. That compares with a 2.2 percent median forecast of four estimates in a Bloomberg survey. Underlying prices rose 0.2 percent from October.

Spain is facing a deepening recession as Prime Minister Mariano Rajoy struggles to tackle a budget deficit that matches that of Greece as the euro-area’s second biggest after Ireland. The European Central Bank last week cut its 2013 inflation forecast for the region and left the door open for a benchmark interest rate cut as it sees the economy shrinking next year.

Spain’s headline inflation rate, based on EU calculations, was 3 percent, matching an estimate published on Nov. 30. Excluding the impact of tax increases, the annual inflation rate was 0.9 percent, based on Spanish calculations.

To contact the reporter on this story: Angeline Benoit in Madrid at abenoit4@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net